Estate planning – no estate required

The first steps toward getting ready for retirement are to dream it and then make a plan to finance it. The next step is to protect it, and estate planning can ensure your wishes with sound planning and the proper legal protections.

Estate planning can seem like a bit of a misnomer because many of us don’t think of ourselves as having an “estate”. It’s simply a term to describe thinking in advance about things like:

  • how would you like to give away or pass down your assets over the course of your life and afterwards?
  • who would care for your children or other dependents if you are unable to?
  • what kind of medical care would you like as you age?

Estate planning is important for everyone, not just older people, or those with a lot of assets or dependents. Spouses or children may often be the legal default beneficiaries if no other plans are specified. But for those who are not married and do not have a clear next of kin, naming designated beneficiaries and having your wishes clearly expressed is extremely important.

It is also important to start thinking early about the future plans for your assets because in some cases, you may wish to give away money while you are alive. Perhaps it would be meaningful to make a philanthropic donation to a cause you have long supported. There can also be tax benefits for you and the recipients of your gifts if you choose to make them while you are living, rather than leaving it all as inheritance. Your qualified legal and tax advisors can help you figure out if setting up a trust for someone or an institution is the best legal and most tax-efficient way to protect a portion of your assets.

Estate planning will get more complicated if you have more complex assets, such as real estate, private equity investments, or own a business — and joint ownership structures can bring a further layer of issues to consider. Similarly, if you are divorced or re-married, or if you have dual citizenship or live outside of the US, your situation may also be more complicated. Therefore, it’s critical to seek appropriate legal and tax advice as you make decisions concerning your estate plan.

For a basic estate plan, there are four main areas to consider and most of your wishes can be stated in a combination of a will and a living will.

  1. Assets: You will already likely have specific designated beneficiaries for any retirement accounts, college savings and life insurance. But it’s also important to express how you would like other assets, such as regular bank accounts or brokerage accounts, any home you may own or other valuables, such as a car, special jewelry or artwork, be divided.
  2. Custody: If you have minor children or family members with special needs, it is extremely important to have clear custody arrangements for them in place in the event that you are unable to take care of them. You might even want to specify your wishes with regard to any pets you have.
  3. Health: Stating what kind of medical care do you want—or do not want—in the event you are not able to give consent, particularly in a life-threatening situation, is called a living will. This document can be especially helpful to relatives who might have to make these difficult decisions for you.
  4. People: Who is an appropriate executor for your will? Do you need to give someone power of attorney for your financial accounts? Who will carry out decisions regarding medical care, in the event that you cannot make the decisions? Ideally, you should have at least one person and a back-up who could help out if needed.

One last important step is to talk to all of the people that have an interest in your estate plan – from potential beneficiaries, such as a spouse, children, other close family or friends, and anyone named as a potential custodian, executor or trustee. Make sure they understand your intentions and are comfortable with any role they may need to play.

Making an estate plan can be one of the hardest parts of retirement planning because it involves some legal issues and you have to think through some difficult and uncomfortable situations. But most people feel a big sense of relief once a plan is in place. Just don’t forget to update your plan with any major changes in your life!

This informational and educational content does not offer or constitute – and should not be relied upon – as financial, tax or legal advice. Your unique needs, goals and circumstances require and deserve the individualized attention of your own legal and tax professionals, and Equitable Advisors, LLC (Equitable Financial Advisors in MI and TN) and its affiliates and associates do not provide legal or tax advice or services.
GE-5473163.1 (02/2023) (Exp. 02/2026)